Question

35. You can afford a $1,050 per month mortgage payment. You've found a 30-year loan at 4.5% interest. (a) How big of a loan can you afford? $ (b) How much total money will you pay the bank? $ (c) How much of that money is interest? $

Answer 1

The monthly payment formula is:

`M=A(r(r+1)^n)/((1+r)^n-1)`

To find the total amount of the loan we solve this equation for A, then we have:

`A=M((1+r)^n-1)/(r(r+1)^n)`

Now in this formula r is the monthly interest rate, n is the number of payments and M is the monthly mortage, then we have:

`\begin{gathered} A=(1050)((1+(0.045)/(12))^(360)-1)/(((0.045)/(12))((0.045)/(12)+1)^(360)) \\ A=207229.22 \end{gathered}`

Therefore you can get a loan of $207,229.22

You will pay the bank a total of $378,000.

The total interest would be $170770.78